No bidders at HUD auction

No one stepped forward to bid on nine Syracuse buildings at a noon auction today held by the Department of Housing and Urban Development.

City and federal officials who wanted the auction canceled heralded the lack of bidders as a vindication of their position that HUD was asking too much for the buildings and that a more orderly, systematic approach to redeveloping the buildings needs to take place.

"It's painfully obvious that HUD should have granted the 6-month extension instead of stubbornly rushing forward to conduct a sale that everyone knew was not going to work," said Senator Chuck Schumer, who teamed up with Mayor Matt Driscoll and Senator Hillary Clinton to oppose the auction. "Now they should go back to the drawing board and work with the city."

Driscoll added that the lack of bidders "makes the point that we have been trying to articulate to HUD, which is that the properties are worthless and that HUD would not get what it anticipated through the auction."

Clinton called the auction "wholly unsuccessful."

HUD had told Driscoll that if he wanted to avert the auction, the city would have to buy the properties itself for $9.7 million. But investors showed today that they thought the properties weren't even worth the $200,000 deposit HUD was requiring, Driscoll said.

When Christopher Willett, an attorney hired by HUD to conduct the auction, asked for bidders to step forward with the $200,000 certified check required to bid at the auction, no one budged.

That prompted Rich Puchalski, who heads the neighborhood advocacy group Syracuse United Neighbors, to jokingly pull $10 out of his pocket and offer it to Willett.

Willett then got on his cell phone to call HUD's Atlanta office and ask what he should do next. Willett said he had never before conducted an auction in which no one stepped forward to bid.

HUD officials told Willett to wait 10 minutes and give the auction another try. If no one stepped forward, HUD told Willett, he should cancel the auction, and that's exactly what happened.

The Post-Standard is seeking clarification on exactly what the cancellation of the auction means for the properties.

Willett said that by canceling the auction instead of adjourning it, the properties would go back to their previous owner, ElJay Redevelopment Co. HUD had foreclosed on ElJay for failing to keep up the properties and provide safe living conditions. Willett said that before any new auction could be held, a new foreclosure proceeding against ElJay would have to take place.

But a HUD spokesman on Monday outlined a different procedure, saying the auction would simply be advertised again and held again in 60 days.

The city, meanwhile, is hoping to avert another auction all together. They want HUD to work with the city to find a responsible developer capable of rehabilitating the properties. The city doesn't feel that any bidder who steps forward should be able to obtain the buildings, many of which sit on prominent streets and corners.

City Operations Director Tim Carroll said that someone like John Kiggins, a landlord with a long history of code violations who was jailed last year for failing to fix his properties, could have obtained ownership of the buildings if he showed up at the auction with a $200,000 check.

"That's not the way to deal with such sensitive buildings, buildings that can either be key assets or a real headache for the city," Carroll said.

Driscoll said HUD has not articulated to the city how it will proceed. But he hopped the city and the federal housing agency could move forward cooperatively.

"We need to work together for the proper disposal of these properties," said Driscoll, who has been in discussions with the state and a group called the National Housing Trust to find the financing needed for the properties to be attractive to a developer. The city estimates that the properties need millions more in work than a developer could ever hope to get out of them in rents.

That was also the assessment of Orlando Guadalupe, a San Antonio investor who often buys HUD properties out of foreclosure. He flew to Syracuse to observe the auction, but said he estimates the nine buildings need more than $50 million in repairs, and that in this market those repairs didn't make sense.

"If they waived the $200,000 requirement I might have given it more thought," Guadalupe said. "A developer is going to need every penny to make those properties work. To me, the mayor's approach makes sense. It's his city. He knows best."